Russia Prepares Sweeping Retaliatory Measures for U.S. Sanctions

On April 13, 2018, a Draft Law "On Retaliation Measures (Countermeasures) for Unfriendly Actions by the United States of America and/or Other Foreign States" (the "Draft Law") was introduced in the Russian State Duma (the lower chamber of the Russian parliament). The Draft Law contemplates Russia's response to the latest U.S. economic sanctions imposed by the U.S. Department of the Treasury's Office of Foreign Assets Control on April 6, 2018.

The Draft Law authorizes the Russian government to take a number of measures against U.S. companies and individuals as well as companies and individuals of other states ("other foreign states"), including organizations where 25 percent of capital is controlled, directly or indirectly, by U.S. organizations or organizations from other foreign states, that imposed or supported sanctions on Russia, Russian entities and/or individuals:

prohibition or restrictions on import of agricultural products, raw materials and food products (to be determined by the Russian government), alcohol and tobacco products, and pharmaceutical products (except products that have no Russian analogues) originating from the U.S. and/or such other foreign states;

a travel ban on U.S. citizens and citizens of such other foreign states, according to the list to be determined by the applicable Russian executive authority;

termination or suspension of international cooperation of Russia and Russian legal entities with the U.S. and/or such other foreign states and their respective entities in the nuclear, aviation and rocket-propulsion industries;

prohibition or restrictions on procurement of technological equipment and software, originating from the U.S. and/or such other foreign states, by the Russian state and municipal entities as well as by certain other entities;

prohibition or restrictions on procurement by the Russian state and municipal entities as well as by certain other entities of certain works and services, including consulting, auditing and legal services, provided by U.S. or such other foreign states' entities;

prohibition or restrictions on privatization of state and municipal property by U.S. citizens and entities and citizens and entities of such other foreign states;

prohibition or restrictions on access in running or carrying out sale of state property on behalf of the Russian Federation, for U.S. or such other foreign states' entities;

exhaustion of certain trademarks (to be determined by the Russian government) owned by U.S. citizens, the U.S. or entities of such other foreign states;

increase of air navigation service charges for U.S. and/or such other foreign states' aircraft carrying out deliveries and using Russian airspace;

export of products and equipment made of rare-earth metals by U.S. citizens and entities and citizens and entities of such other foreign states;

employment ban on U.S. citizens and citizens of such other foreign states, including skilled personnel; and

prohibition or restrictions on import of any other products (where determined by the Russian government originating from the U.S. and/or such other foreign states).

The Draft Law was introduced by the heads of all political factions of the State Duma and by Mr. Volodin, the Duma's Chairman; later the bill was co-sponsored by the majority of Duma members, which demonstrates the high level of support of the Draft Law. For the bill to become law, it needs to pass three parliamentary readings, get approved by the Federation Council (the upper house of the Russian parliament) and be signed by the President.

The Draft Law in its current form appears to be a blanket act giving wide discretion to the Russian Government to implement various restrictive measures outlined in the Draft Law.

There is little doubt that the fate of the Draft Law will be ultimately decided by the Russian President and that the Parliament will provide unanimous support to whatever restrictive provisions the Russian President may require to be implemented. The first reading of the Draft Law has been scheduled for May 15, 2018, which is after the inauguration of the Russian President scheduled for May 7, 2018. It is likely that between the inauguration and the first reading of the Draft Law, the Russian President will propose a candidate for the post of Prime Minister to be approved by the State Duma and to form a new Russian Government. It is very possible that the Draft Law might be substantially modified in the course of the first reading. We will continue to monitor further developments.

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